Bradford & Bingley shares slumped last week amid concern that it would be the next bank to be rescued by the authorities. Today the Government is expected to announce nationalisation of B&B to create a “superbank” alongside Northern Rock.

B&B’s 2.5m savers. with £22 billion deposited at the bank were reassured their money was safe. However, the reports come at the end of a week in which B&B cut 370 jobs in its mortgage division after applications fell.

We answer your questions.

Q: Is Bradford & Bingley about to go bust?

A: Almost certainly not. B&B is strongly capitalised and can call on the Bank of England’s Special Liquidity Scheme, which should help tide it over in the coming months.

Q: How safe are my savings with B&B?

A: That depends on how much money you have with the bank. The Financial Services Compensation Scheme (FSCS) covers your deposits in full up to £35,000. Any savings above that are not covered. However, should the worst happen and the bank goes bust, the Government is likely to step in and guarantee deposits, as it did with Northern Rock.

Investments are covered up to £48,000 - 100 per cent of the first £30,000 and 90 per cent of the next £20,000. For pensions and insurance-based investment products, such as with-profits, you would get 100 per cent of the first £2,000 and 90 per cent of the remainder of the claim.

Q: I have more than £35,000 with B&B. Should I withdraw the excess above £35,000 and place it with one or more other financial groups?

A: Most financial experts suggest that in the current financial climate it is wise to spread your savings with a number of different institutions. Although it is very unlikely that B&B will be allowed to go bust, it’s worth making sure that your savings are all fully covered by the FSCS guarantee. This would mean spreading your savings cash around so that you have no more than £35,000 in any one financial group. That way you should be able to sleep more easily at night

Bear in mind that if you have savings with different brands owned by the same company, the £35,000 limit only applies to your combined savings with the company, not the separate brands. Halifax, Bank of Scotland, Birmingham Midshires and Intelligent Finance, for example, are all part of the same group and are registered with the FSA under the name of Bank of Scotland.

This issue has been highlighted by the recent rescue of Derbyshire and Cheshire building societies by Nationwide – many savers who have deposits with all three banks have had their protection slashed by the deal.

Q: My wife and I have a joint savings account with B&B. What is our position?

A: Since each individual is entitled to the benefit of the £35,000 cover you and your wife would have the first £70,000 of your savings with B&B protected.

Q: How will the savings market as a whole be affected?

A: Savers could be one of the few winners of the ongoing turmoil. Banks are likely to continue to be cautious about lending money to each other.

As a result, mortgage lenders will be more reliant on using money from savers to fund their lending. This reliance means high rates on offer to savers are unlikely to disappear any time soon, with banks and building societies coming under increasing pressure to get savers’ money through their door.

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